Plain packaging plans advance in the UK and Ireland whilst the WTO dispute over Australia's laws also heats up

On 10 June 2014 the Irish Government announced it will be the first country in the European Union to introduce plain packaging for tobacco products and published draft legislation which requires that brand names are only present in a standard font and excludes any other graphic or text elements by which manufacturers can express their brand identity. The Irish announcement was shortly followed on 26 June 2014 by the UK Government's launch of a further consultation on plain packaging and draft Regulations setting out how such proposals would be implemented in UK law.

We have previously reported on the challenges similar legislation in Australia faced under the Trade Related Aspects of Intellectual Property Rights Agreement, the Paris Convention and the Australian Constitution in the August 2011 and September 2012 issues of Food Law Digest. We also reported on the dangerous precedent it sets for brand owners in the Food & Beverage sector in the January 2014 issue of Food Law Digest.

UK Developments

Following an earlier public consultation run by the UK Department of Health in the summer of 2012, it was thought that the UK Government would propose plain packaging as part of the legislative programme it would announce in May 2013. However, after much speculation in the media, the legislation was not forthcoming and the Health Secretary explained that the Government had put its plans on hold as it wanted to wait and see how the policy worked in Australia before making a final decision. Many thought that this signalled that the proposal had lost political support and would be unlikely to re-appear in the immediate future.

However, this view was challenged in November 2013 when the Government unexpectedly agreed to back an amendment to the Children and Families Bill proposed by a cross party group of peers during the Bill's passage through the House of Lords. The Bill received Royal Assent on 13 March 2014 and section 94 gives the Health Secretary the power to make regulations to introduce plain packaging at some point in the future if he "considers that the regulations may contribute at any time to reducing the risk of harm to, or promoting, the health or welfare of people under the age of 18."

At the same time as announcing its backing for the amendment, the Government asked Sir Cyril Chantler, an academic paediatrician from Kings College London, to conduct an independent review into "whether or not the introduction of standardised packaging is likely to have an effect on public health (and what any effect might be), in particular in relation to the health of children." The final report was published on 3 April 2014 and Sir Chantler's conclusion was that, "Although I have not seen evidence that allows me to quantify the size of the likely impact of standardised packaging, I am satisfied that the body of evidence shows that standardised packaging, in conjunction with the current tobacco control regime, is very likely to lead to a modest but important reduction over time on the uptake and prevalence of smoking and thus have a positive impact on public health."

On the same day the report was published, the Public Health Minister announced that the Government is now minded to introduce plain packaging and would shortly be publishing draft Regulations implementing the proposals. The consultation document and draft Regulations were published by the Department of Health on 26 June 2014. An annex to the consultation documents shows the following illustrative example of how cigarette packaging is likely to look should the proposals be adopted.

The consultation is due to run until 7 August 2014 and the Government has asked in particular for respondents to provide new or additional information relevant to standardised packaging that has arisen since the 2012 consultation. In recognition of the fact that the Chantler review did not consider the wider implications of standardised packaging, including the question of legality and compensation, the Government intends the consultation to particularly inform its decision making in relation to the wider issues raised by the policy. These are likely to include the legal, economic and criminal implications of the policy.

The legal implications in particular will be of key importance to the Government in making its decision. There are serious arguments that introducing standardised packaging will breach the UK's obligations under both European law and the Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") leaving the Government open to legal challenges in the Courts and through the World Trade Organisation. Regulations implementing standardised packaging could also risk challenge under domestic UK legislation such as the Human Rights Act 1998 which gives effect to the provisions of the European Convention on Human Rights ("ECHR") relating to the deprivation of private property by the state and the protection of intellectual property. Under the ECHR a deprivation of property by the state is only allowed where it is proportionate. The proportionality of a deprivation is inextricably linked to compensation as courts have repeatedly stated that a deprivation can only be considered proportionate where it is accompanied by fair compensation. Both the international and domestic legal issues will therefore need to be considered by the Government before reaching a final decision.

The WTO dispute heats up

Since Australia first notified the WTO of its Plain Packaging Bill in April 2011, the measure has been extensively debated and is now subject to legal challenges. Five WTO Members States – the Ukraine, Honduras, the Dominican Republic, Cuba and Indonesia – have initiated dispute settlement proceedings against Australia’s measures at the WTO.

A panel of three experts was appointed on 5 May 2014 to decide whether Australia violates its WTO obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights and Agreement on Technical Barriers to Trade, among others.

The dispute in relation to the TRIPS Agreement focuses in particular on the following provisions:

Article 20 of the TRIPS Agreement requires that the use of a trade mark shall not be unjustifiably encumbered by special requirements. The introduction of standardised packing encumbers the tobacco companies' marks because (1) the companies have been completely deprived of those marks which are no longer allowed on the packs i.e., all marks except for the brand name; and (2) for those marks which are allowed to remain on the packs, standardised packaging requires use "in a special form" e.g., use in a standard font, size and position on the pack. Standardised packaging is therefore detrimental to the ability of the marks to distinguish the goods of one manufacturer from those of another, leaving them to compete solely on price.

Furthermore, the encumbrances have to be justified, that is, standardised packaging has to be demonstrably reasonable and proportionate, meaning that it must be both suitable and necessarily the least restrictive means to achieve the public health objective. Depriving the tobacco companies of their marks in such a draconian way therefore has to be balanced against the public health benefits according to this standard.

Article 15(4) of the TRIPS Agreement requires the registration of a trade mark irrespective of the nature of goods to which it is to be applied, assuming the goods themselves are lawful. The introduction of standardised packaging discriminates against marks for tobacco products based on the nature of the goods to which they are applied as the use of the marks on tobacco products is all but banned and because of the inextricable link between use and registration of a mark.

The Panel of WTO experts may issue its decision as early as the end of 2014, according to the standard WTO rules. The parties can then appeal the decision to a standing Appellate Body of experts, whose final report will be issued up to 90 days from the appeal. This means that a final WTO decision is expected to be adopted within the next 12 months.

If the UK and Ireland also decide to implement plain packaging measures they would be likely to face a similar challenge under the TRIPS Agreement.

A challenging precedent for brands

The intention of the UK and Irish Governments to bring in such measures is of concern to many brand owners, not least because of the precedent it sets for possible public health intervention in other industries. On 28 March 2014 the concerns of many brand owners were expressed in a joint statement of the IPR associations APRAM, ICC BASCAP, BMM, ECTA, MARQUES, UNIFAB and UNION-IP (available here).

The regulatory trends in the tobacco industry have historically been followed a number of years later in the alcohol and food industries. A report by Deloitte in 2013, Accelerating Complexity, regarding regulatory trends in the consumer goods industry shows there is a well established cascade in regulatory and tax measures based on public health intervention from the tobacco industry to the alcohol and food industries. Evidence of this can already be seen in Australia where the New South Wales parliament recently debated the Alcoholic Beverages Advertising Prohibition Bill 2012 which would effectively introduce similar restrictions on the adverting of alcohol as are currently applied to tobacco products, e.g., bans on print and broadcast advertising and sponsorship.

The implications of plain packaging for brands in general cannot therefore be seen as an issue confined to only one industry. Those most likely to see a drip-feed of mandatory packaging health warnings and branding restrictions similar to those seen for tobacco are producers of alcoholic beverages, fizzy drinks and food products containing fat, sugar or salt, which the World Health Organisation has stated are prime candidates for stronger regulatory controls.

A Dutch senior health official recently referred to sugar as "the most dangerous drug of our time" and suggested introducing health warnings similar to health warnings for tobacco products. Whilst we might be unlikely to see plain packaging for alcohol or fast food in the near future, the history of tobacco packaging does show that there is a precedent for brands being 'salami sliced' whereby ever increasing health warnings squeeze the space available for branding until the point where the branding is removed altogether. Given the importance of plain packaging to brands in general many will want the UK Government to heed calls for a specific public consultation on the intellectual property implications of the policy before taking its final decision.